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Reportable Business Segment Information
 12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
Reportable Business Segment Information
Reportable Business Segment Information
Segment Organization and Products
PPG is a multinational manufacturer with 11 operating segments (which the Company refers to as “strategic business units”) that are organized based on the Company’s major products lines. These operating segments are also the Company’s reporting units for purposes of testing goodwill for impairment (see Note 1, “Summary of Significant Accounting Policies”).
The Company’s reportable business segments include the following three segments: Performance Coatings, Industrial Coatings and Glass. The operating segments have been aggregated based on economic similarities, the nature of their products, production processes, end-use markets and methods of distribution.
The Performance Coatings reportable segment is comprised of the refinish, aerospace, architectural coatings – Americas and Asia Pacific, architectural coatings - EMEA, and protective and marine coatings operating segments. This reportable segment primarily supplies a variety of protective and decorative coatings, sealants and finishes along with paint strippers, stains and related chemicals, as well as transparencies and transparent armor.
The Industrial Coatings reportable segment is comprised of the automotive original equipment manufacturer (“OEM”) coatings, industrial coatings, packaging coatings, coatings services and the specialty coatings and materials operating segments. This reportable segment primarily supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants, metal pretreatment products, optical monomers and coatings, precipitated silicas and other specialty materials.
The Glass reportable segment is comprised of the fiber glass operating segment. This reportable segment primarily supplies continuous-strand fiber glass products.
Production facilities and markets for Performance Coatings, and Industrial Coatings are global, while Glass is only North America. PPG’s reportable segments continue to pursue opportunities to further develop their global markets, including efforts in Asia, Eastern Europe and Latin America. Each of the reportable segments in which PPG is engaged is highly competitive. The diversification of our product lines and the worldwide markets served tend to minimize the impact on PPG’s total sales and income from continuing operations of changes in demand in a particular market or in a particular geographic area.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies (See Note 1, “Summary of Significant Accounting Policies”). The Company allocates resources to operating segments and evaluates the performance of operating segments based upon segment income, which is income before interest expense – net, income taxes, and noncontrolling interests and excludes certain charges which are considered to be unusual or non-recurring. The Company also evaluates performance of operating segments based on working capital reduction, margin growth, and sales volume growth. Legacy items include current costs related to former operations of the Company, including certain environmental remediation, pension and other postretirement benefit costs, and certain charges for legal and other matters which are considered to be unusual or non-recurring. These legacy costs are excluded from the segment income that is used to evaluate the performance of the operating segments.
Corporate unallocated costs include the costs of corporate staff functions not directly associated with the operating segments, the cost of corporate legal cases, net of related insurance recoveries and the cost of certain insurance and stock-based compensation programs. Net periodic pension expense is allocated to the operating segments and the portion of net periodic pension expense related to the corporate staff functions is included in the Corporate unallocated costs.
Product movement between Performance Coatings and Industrial Coatings is limited, is accounted for as an inventory transfer, and is recorded at cost plus a mark-up, the impact of which is not significant to the segment income of the coatings reportable segments.
($ in millions)
Reportable Business Segments
Performance Coatings
 
Industrial Coatings
 
Glass
 
Corporate / Eliminations /
Non-Segment Items(1)
 
Consolidated Totals
2016
 
 
 
 
 
 
 
 
 
Net sales to external customers
$
8,580

 
$
5,690

 
$
481

 
$
—

 
$
14,751

Intersegment net sales
—

 
1

 
—

 
(1
)
 
—

Total net sales
$
8,580

 
$
5,691

 
$
481

 
$
(1
)
 
$
14,751

Segment income
$
1,314

 
$
1,042

 
$
53

 
$
—

 
$
2,409

Legacy items(2)
 
 
 
 
 
 
 
 
(115
)
Business restructuring charge
 
 
 
 
 
 
 
 
(197
)
Transaction-related costs(5) 
 
 
 
 
 
 
 
 
(9
)
Pension settlement charges
 
 
 
 
 
 
 
 
(968
)
Asset write-downs
 
 
 
 
 
 
 
 
(27
)
Loss on divestiture of European fiber glass business
 
 
 
 
 
 
 
 
(42
)
Gains on disposals of ownership interests in business affiliates
 
 
 
 
 
 
 
 
82

Interest expense, net of interest income
 
 
 
 
 
 
 
 
(99
)
Corporate unallocated(1)
 
 
 
 
 
 
 
 
(207
)
Income before income taxes
 
 
 
 
 
 
 
 
$
827

Depreciation and amortization
$
272

 
$
143

 
$
22

 
$
25

 
$
462

Share of net earnings (loss) of equity affiliates
$
5

 
$
1

 
$
3

 
$
3

 
$
12

Segment assets(3)
$
9,168

 
$
3,972

 
$
220

 
$
2,409

 
$
15,769

Investment in equity affiliates
$
30

 
$
13

 
$
—

 
$
3

 
$
46

Expenditures for property (including business acquisitions)
$
187

 
$
510

 
$
22

 
$
32

 
$
751

($ in millions)
Reportable Business Segments
Performance Coatings
 
Industrial Coatings
 
Glass
 
Corporate / Eliminations /
Non-Segment Items(1)
 
Consolidated Totals
2015
 
 
 
 
 
 
 
 
 
Net sales to external customers
$
8,765

 
$
5,476

 
$
525

 
$
—

 
$
14,766

Intersegment net sales
—

 
1

 
—

 
(1
)
 
—

Total net sales
$
8,765

 
$
5,477

 
$
525

 
$
(1
)
 
$
14,766

Segment income
$
1,302

 
$
985

 
$
38

 
$
—

 
$
2,325

Legacy items(2)
 
 
 
 
 
 
 
 
(51
)
Business restructuring charge
 
 
 
 
 
 
 
 
(140
)
Transaction-related costs(5)
 
 
 
 
 
 
 
 
(44
)
Interest expense, net of interest income
 
 
 
 
 
 
 
 
(86
)
Corporate unallocated(1)
 
 
 
 
 
 
 
 
(221
)
Income before income taxes
 
 
 
 
 
 
 
 
$
1,783

Depreciation and amortization
$
296

 
$
124

 
$
25

 
$
26

 
$
471

Share of net earnings/(loss) of equity affiliates
$
7

 
$
—

 
$
7

 
$
(3
)
 
$
11

Segment assets(3)
$
9,917

 
$
3,643

 
$
557

 
$
2,959

 
$
17,076

Investment in equity affiliates
$
45

 
$
13

 
$
127

 
$
36

 
$
221

Expenditures for property (including business acquisitions)
$
298

 
$
414

 
$
24

 
$
38

 
$
774


($ in millions)
Reportable Business Segments
Performance
Coatings
 
Industrial
Coatings
 
Glass 
 
Corporate / Eliminations /
Non-Segment Items(1)
 
Consolidated
Totals
2014
 

 
 

 
 

 
 

 


Net sales to external customers
$
8,698

 
$
5,552

 
$
541

 
$
—

 
$
14,791

Intersegment net sales
—

 
1

 
—

 
(1
)
 
—

Total net sales
$
8,698

 
$
5,553

 
$
541

 
$
(1
)
 
$
14,791

Segment income
$
1,205

 
$
951

 
$
35

 
$
—

 
$
2,191

Legacy items(2)
 

 
 

 
 

 
 

 
(27
)
Debt refinancing charge
 
 
 
 
 
 
 
 
(317
)
Transaction-related costs(5)
 
 
 
 
 
 
 
 
(62
)
Interest expense, net of interest income
 

 
 

 
 

 
 

 
(137
)
Corporate unallocated(1)
 

 
 

 
 

 
 

 
(256
)
Income before income taxes
 

 
 

 
 

 
 

 
$
1,392

Depreciation and amortization
$
284

 
$
115

 
$
27

 
$
24

 
$
450

Share of net earnings of equity affiliates
$
—

 
$
—

 
$
(3
)
 
$
104

 
$
101

Segment assets(3)
$
10,709

 
$
3,621

 
$
531

 
$
2,674

 
$
17,535

Investment in equity affiliates
$
41

 
$
15

 
$
127

 
$
112

 
$
295

Expenditures for property (including business acquisitions)
$
2,374

 
$
251

 
$
33

 
$
19

 
$
2,677


($ in millions)
 
 
 
 
 
Geographic Information
2016
 
2015
 
2014
Net sales(4)
 
 
 
 
 
United States and Canada
$
6,595

 
$
6,589

 
$
6,624

Europe, Middle East and Africa (“EMEA”)
4,304

 
4,270

 
4,802

Asia Pacific
2,431

 
2,434

 
2,517

Latin America
1,421

 
1,473

 
848

Total
$
14,751

 
$
14,766

 
$
14,791

Segment income
 
 
 
 
 
United States and Canada
$
1,202

 
$
1,218

 
$
1,200

EMEA
588

 
528

 
576

Asia Pacific
387

 
366

 
319

Latin America
232

 
213

 
96

Total
$
2,409

 
$
2,325

 
$
2,191

Property—net
 
 
 
 
 
United States and Canada
$
1,335

 
$
1,315

 
$
1,248

EMEA
726

 
805

 
831

Asia Pacific
447

 
431

 
414

Latin America
251

 
271

 
402

Total
$
2,759

 
$
2,822

 
$
2,895

(1)
Corporate intersegment net sales represent intersegment net sales eliminations. Corporate unallocated costs include the costs of corporate staff functions not directly associated with the operating segments, certain legal and insurance costs and stock-based compensation expense.
(2)
Legacy items include current costs related to former operations of the Company, including certain environmental remediation, pension and other postretirement benefit costs, legal costs and certain charges which are considered to be non-recurring. Until April 2016, legacy items also include equity earnings from PPG’s minority investment in Pittsburgh Glass Works, LLC. The Legacy items for 2016 and 2014 include environmental remediation pre-tax charges of $82 million and $138 million, respectively. These charges relate to continued environmental remediation activities at legacy chemicals sites, primarily at PPG’s former Jersey City, N.J. chromium manufacturing plant and associated sites (See Note 13). In 2014, Legacy items includes the gains from an equity affiliates sale of a business line (Refer to Note 2, “Acquisitions and Divestitures”).
(3)
Segment assets are the total assets used in the operation of each segment. Corporate assets are principally cash and cash equivalents, cash held in escrow, short term investments, deferred tax assets and, until April 2016, PPG’s equity investment in it’s former automotive glass and services business. Non-segment items also includes the assets of businesses which have been reclassified as discontinued operations in the Consolidated Statement of Income. (Refer to Note 2, “Acquisitions and Divestitures”).
(4)
Net sales to external customers are attributed to geographic regions based upon the location of the operating unit shipping the product.
(5)
Transaction-related costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred to effect significant acquisitions, as well as similar fees and other costs to effect divestitures not classified as discontinued operations. These costs also include the flow-through cost of sales for the step up to fair value of inventory acquired in acquisitions. These costs also include certain nonrecurring severance costs and charges associated with the Company’s business portfolio transformation.